Today’s interest rates remain at all-time record lows, and that means it might be a good time to consider refinancing your home loan, especially if you’ve had it for several years.
EXPERT INSIGHT: Refinancing your mortgage with only a tiny 1% decrease in your interest rate can help you save tens of thousands of dollars over the life of your loan.
Of course, every homeowner’s situation is different, and there are a lot of factors that can determine whether or not refinancing is the best choice for you.
If the new loan has an interest rate that’s at least a half point lower than your current rate, it usually makes sense to refinance; the greater the difference between your current rate and the new rate, the more savings you’ll experience.
Loan rates are based mostly on creditworthiness, so if you’re score has improved since you took out your original mortgage, you might qualify for a significantly lower rate. Many lenders have also lowered their credit requirements in recent years which can also help your ability to qualify for a lower rate.
If your income has changed, you may want to switch to a shorter term that will allow you to pay off your home more quickly – and often at a lower rate – than a long-term mortgage.
Switching to a low-rate adjustable rate mortgage (ARM) can be a good choice if you’re planning to relocate before the adjustment kicks in. You’ll pay less now and can put more money in savings to put toward your next home.
Once your loan balance is below 80% of your home’s value, you usually can get rid of costly PMI. A refi is a great way to do just that while also restructuring your loan to more favorable terms.
If you have an ARM and that low introductory rate is about to readjust, refinancing can let you lock in a low rate and help you avoid regular adjustments over time that can be costly.
Refinancing can help you get a lower interest rate or allow you to modify the “term” of your mortgage, lowering your monthly payments.
Today’s lenders have made the refinancing process simpler than ever, and most loan approval decisions are made the same day you apply, which means there’s no long, nerve-wracking waiting period. Take a good look at your situation, and if a refinance seems like it might make sense for you, go ahead and take the plunge, you may end up saving thousands of dollars!